The 30-share BSE index plunged 1,190 points or 2.09 per cent to close at 55,822; while the broader NSE Nifty settled 371 points or 2.18 per cent lower at 16,614.
Tata Steel, SBI, IndusInd Bank, Bajaj Finance and HDFC Bank were the major losers in the sensex pack falling as much as 5.2 per cent. Twenty-eight out of 30 stocks finished in red.
Whereas HUL and Dr Reddy’s were the only two gainers.
On the NSE platform, all sub-indices ended lower with Nifty Realty, PSU Bank and Metal stocks falling up to 4.9 per cent.
However, bucking the overall market trend, shares of Future Group companies surged about 20 per cent after the Competition Commission of India (CCI) suspended Amazon’s 2019 deal with the group, potentially making it easier for Reliance Retail to buy Future’s retail business.
On the other hand, shares of Shriram Properties had a muted debut on the bourses with shares listing at 24 per cent discount on the BSE.
Here are the top reasons for today’s fall:
* Rising cases of Omicron
Investor sentiments were spooked by concerns over rising Omicron cases across the world, which may have the potential to derail global economic recovery.
India’s total tally of Omicron cases rose to 160 as of 3.30 pm today. In all, the variant has been detected across 11 states and union territories with 54 cases being reported from Maharashtra alone.
The US government also warned its citizens over possibility of “breakthrough infections”. Health officials urged people to get booster shots, wear masks and be careful if they travel over the winter holidays, as the Omicron variant was set to take over as the dominant strain.
European stock index futures fell over 2 per cent amid global sell off in equities amid tighter pandemic-related curbs on the global economy.
The Netherlands went into lockdown on Sunday and the possibility of more Covid-19 restrictions being imposed ahead of the Christmas and New Year holidays loomed over several European countries.
Asian stock markets and oil prices also sank on fears of a fresh global surge in coronavirus infections.
* Sebi shuts future trading to curb inflation
The Securities and Exchange Board of India (Sebi) has ordered a year-long suspension of futures trading in key farm commodities, as the world’s biggest importer of vegetable oils, and a key producer of wheat and rice, struggles to tame food inflation.
The halt is India’s most dramatic move since it allowed futures trade in 2003.
It threatens market confidence by making hedging difficult for traders, weeks after farmers ended a year of protests that led to the scrapping of contentious reforms.
Price of edible oil stands near record highs and promoted the Centre to substantially cut taxes on imports of palm, soy and sunflower oil.
For the month of November, India’s wholesale price inflation (WPI) surged to a record high of 14.23 per cent, while retail inflation came at 4.91 per cent mainly due to hardening of prices of mineral oils, basic metals, crude petroleum and natural gas.
* Policy tightening amid soaring global inflation
Inflation has been a growing concern throughout 2021 not only in India but globally.
Higher raw materials costs and supply chain problems have been raising overall costs for businesses, which have increased prices on goods to offset the impact.
Consumers have so far absorbed those price increases, but they are facing persistent pressure from rising prices and that could prompt a pullback in spending.
A hawkish stance by central banks worldwide has also impacted investor sentiments negatively.
The tempo across global markets broke when the US Federal Reserve changed its stance along with other global central banks last week.
As traders begin to wind down ahead of Christmas and New Year, analysts said trade was thinner and markets more susceptible to swings, but the mood has become increasingly glum as central banks start paring their huge financial support to fight inflation.
Last week, the Fed said it would accelerate a tapering of its bond-buying stimulus to end the program in March, while the Bank of England overnight also surprised markets by becoming the first major global central bank to raise interest rates.
* Continuous selling by FIIs
Foreign institutional investors (FIIs) continued to offload shares in the capital market.
“The fall is also a result of continuous selling by foreign institutional investors. The rollback of liquidity by central bankers will have some kind of repercussions,” Saurabh Jain, assistant vice president at SMC Securities told news agency Reuters.
In total, FIIs have withdrawn more than Rs 17,500 crore from markets in December so far.
* Foreign brokerages not so bullish over Indian markets
Foreign brokerages have been downgrading India’s stock markets for being more expensive as compared with other global stock markets like China, Japan and others.
While the BSE sensex has jumped nearly 28 per cent during the year, the broader NSE Nifty has gained 30 per cent.
The MSCI India index is up about 30 per cent this year — nearly twice the return of the global index.
However, investors have remained cautious of a market recovery as questions surfaced over how sustainable the market rally will be.
* US Fed’s decision on taper
US Federal Reserve officials discussed raising rates as soon as March and starting to run down the central bank’s balance sheet in mid-2022.
However, the remarks barely changed the bond market’s view that short-term interest rates could top out below the Fed’s estimated peak.
“Some inflation concerns have subsided since the Fed has taken action to rein it in, yet at the same time economic activity is likely to be impacted due to Covid-19 restrictions. This could weigh on the treasury markets,” Harshal Barot, a senior research consultant for South Asia at Metals Focus told news agency Reuters.
With no fresh spending now in the pipeline, some analysts said they would lower their growth outlook for the United States next year.
(With inputs from agencies)